Hong Kong: Indian property prices are likely to fall by a one-fourth in the coming year as the global economic crisis saps home buyer confidence, adding to the problems of capital-strapped developers.

A property market boom has been waning for a year, with land prices already falling about 15% from a mid-2007 peak, although forced sales have been rare.

But consultants and investors at the MIPIM Asia conference in Hong Kong this week have predicted tougher times ahead.

“We’re expecting a horrible 2009," said Anshul Jain, chief executive for property services firm DTZ in India. “Prices have already shown signs of coming off, and chinks in the armour are surfacing."

Indian property prices doubled in the two years after the country eased rules in early 2005 on inward investment in the construction industry, sparking interest in home-building among foreign funds. Developers, sometimes in league with funds run by the likes of Morgan Stanley, Citigroup Inc., and Merrill Lynch and Co., snapped up land.

The bigger firms, such as DLF Ltd and Parsvnath Developers Ltd, launched huge initial public offerings to fund new townships in a country where little housing had been built for 50 years.

But the sharp rise in prices, coupled with interest rate hikes designed to calm inflation in the booming economy, slowed home sales. And the crisis has added to the gloom, with residential transactions down by half from a year ago.

“We could see a 20-25% price correction," said Anurag Mathur, joint India managing director at consultants Cushman and Wakefield.

The global credit crunch and a stock market slump cut off the supply of funds from the capital markets. And now a drop in home sales is shrinking cash flow.

Also, foreign investors, with their own economic worries at home and bargains popping up elsewhere, are unlikely now to jump into a market muddied by red tape, land disputes and unclear titles.